JPMorgan is planning to start trading and marketing interest rate and foreign exchange derivatives in mainland China. The firm will be one of the first U.S. bulge brackets to enter the market and is making the jump because it expects the most populous country in the world to be an end user haven once legalities, such as derivatives documentation and its status in the legal system, are clarified. "We need to prepare for this market now... China will become a big market," said Chester Kam, managing director and head of emerging Asia rates markets in Singapore.
The firm will make the move when it receives its renminbi dealing license, which Kam expects to be in the coming months. JPMorgan, along with many other international players, currently markets non-renminbi derivatives to Chinese clients from Hong Kong. It plans to hire fixed-income derivatives marketers and traders to manage the effort by year end, though the number of staff is still being determined, according to Kam.
"This is certainly a step forward," said an interest rate derivatives head at a rival bank in Hong Kong. Another derivatives professional said that while it makes sense to place marketers in China, closer to the customer and at a cheaper cost than Hong Kong, he is refraining from adopting such a strategy until the market opens further in a few years.
Officials at Citibank, HSBC and Standard Chartered Bank said they have already established onshore marketing teams in mainland China. "Everyone's still bullish on China," said a trader at Standard Chartered. "It'll take time but it's eminently doable," said another official.
